Southern Cross Forest Products, which operates five sawmills across the country, has been tipped into receivership as wood processors continue to struggle with global demand that has pushed up log prices.

KordaMentha's Brendon Gibson and Michael Stiassny were today appointed receivers of the Dunedin-based company, and will look to find a buyer for the profitable parts of its operations.

"The core business is profitable, but as with others in the sector, Southern Cross has suffered in a difficult industry environment," Gibson said in a statement. "We are working with a very strong management team to keep the business trading profitably while we run a sale process."

Some 40 sawmills have closed since 2003, according to the New Zealand Forest Owners Association. In October, the Tachikawa Forest Products sawmill in Rotorua was put in receivership with the loss of 120 jobs.

Southern Cross Forestry Products had borrowings of $17.7 million as at Dec. 31, 2012 with ANZ Bank, UDC Finance, 321 Ltd, Hunter Finance and Heartland, according to its latest financial statements lodged with the Companies Office. Its loans with ANZ and 321 were in breach of certain covenants at the time, and the 2012 accounts were tagged by auditor Deloitte over the company's ability to trade as a going concern.

After the balance date, Southern Cross Forest Products negotiated a new funding facility with ANZ which it said would be reviewed in March, 2014.

The company narrowed its annual loss to $1.58 million in calendar 2012 from $2.92 million a year earlier, as it booked a $2.34 million gain on the value of a 2009 acquisition. Revenue climbed 16 percent to $95 million in 2012, though the gross margin was squeezed to 4.6 percent from 8.6 percent in 2011, as the cost of sales rose at a faster pace.

KordaMentha's Gibson said the receivers will be seeking new owners "who can continue to build on the company's strengths" and expect to start the process in the next few weeks.

Comments from our readers

No comments yet

Add your comment:

Your name:

Your email:

Not displayed to the public

Comment:

Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Anti-spam verification:

Type the text you see in the image into the field below. You are asked to do this in order to verify that this enquiry is not being performed by an automated process.